With a population spanning almost 400-million people across 16 countries, the Southern African Development Community (SADC) has the widest-reaching regional bloc in Africa, holding massive appeal for trade exchanges to strengthen economies and benefit communities.
However, unlocking this potential to enable a seamless and regulated flow of money across borders has been one persisting challenge that requires solving.
A new white paper, “SADC Regional Payments Interoperability – exploring the value of mutual digital infrastructure to drive more formalised, accessible and inclusive payments in the region”, by BankservAfrica and Cenfri, explores the region’s cross-border payments landscape.
The paper also highlights the barriers to growth and elaborates on how a regional payment solution could work for the good of all.
“With exciting innovations and new product launches, payments is an exciting space in the region. However, these fall short of the one critical need: broad-based and all-to-all interoperability,” says Ruhling Herbst, executive head: Africa business development at BankservAfrica. “The ability for money to flow from wallets to bank accounts inexpensively enhances inclusivity, reduces pain points and can encourage the move from cash and informal money send. Achieving this is key to solving the cross-border payments dilemma in the SADC.”
The other chief concerns and opportunities centre around the current market and consumer dynamics – the considerable lower-value person-to-person (P2P), person-to-business (P2B) and business-to-business (B2B) flow into the region brings the opportunity for providers to scale their offerings and to tackle the challenges arising from the emergence of fintechs.
On a consumer level, the preference for cash remains high as most cross-border transactions take place informally. There’s also the issue of commercial, regulatory, infrastructure and consumer barriers, ranging from agent costs to liquidity management, foreign exchange costs and limited data availability, that will need addressing in the first, middle and last mile.
A key finding from the report is that service providers need to be empowered to offer low-cost, high-quality cross-border payment services.
Since 2021, the Transactions Cleared on an Immediate Basis (TCIB) Payment Scheme, managed and operated by BankservAfrica, has been live. Owned and supported by regulators, central banks and established financial institutions in the region, TCIB has been developed as a solution for cross-border challenges.
“From our research we find that reliable cross-border fast retail payments are critical to drive sustainable and inclusive local economies and communities,” Barry Cooper, technical director at Cenfri. “Regional scale is vitally important if accessibility and affordability barriers are to be overcome. The cross-border terrain is very complex if we tackle it individually but so much more achievable if we face it together as a regional scheme.”